This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Trump Entertainment Not Worth the Gamble

Editor's note: "Bricks and Mortar" is a series of columns written by real estate reporter Nicholas Yulico meant to help readers generate real estate and gaming-related stock ideas.

Trump Entertainment (TRMP) shares hit an all-time low Monday, but investors should be wary of thinking the casino operator is now a value play.

Today, I'll provide an update on why I think Trump remains a stock to avoid, while also detailing the ongoing problems at homebuilder Ryland (RYL - Get Report). I flagged both stocks as overvalued in late January.

First, let's take a look at Trump, whose shares plunged more than 16% Monday after the company said it couldn't find an attractive buyout offer for shareholders.

My thesis all along has been that absent a buyout , Trump's stock would be a huge bust. Flagging Trump as overvalued at $17.50 in January has now proven to be my best call since I started the Bricks and Mortar column earlier this year. Trump's stock is down 40% since then.

With shares trading at such a depressed level, it's tempting to say that perhaps Trump has now hit a price where it makes sense to own it.

But the stock is still no bargain. Trump's three Atlantic City casinos continue to face strong headwinds from fresh competition in nearby Pennsylvania and New York.

At Trump's closing price Monday of $10.49, the stock is valued at 9.7 times this year's consensus Wall Street estimate for earnings before interest, taxes, depreciation and amortization. It's 8.5 times the 2008 estimate. That means the stock has essentially the same valuation as Ameristar (ASCA), another small casino company.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
ASCA $0.00 0.00%
MPEL $21.99 0.00%
PENN $16.95 0.00%
RYL $45.19 0.00%
AAPL $130.28 0.00%


DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs